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Hrblock Tax

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Hrblock Tax

Hrblock tax 1. Hrblock tax   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Hrblock tax When repayment contributions can be made. Hrblock tax No deduction. Hrblock tax Reserve component. Hrblock tax Figuring your IRA deduction. Hrblock tax Reporting the repayment. Hrblock tax Example. Hrblock tax General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Hrblock tax Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Hrblock tax Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Hrblock tax Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Hrblock tax 2013 Reporting. Hrblock tax Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Hrblock tax One-time transfer. Hrblock tax Testing period rules apply. Hrblock tax More information. Hrblock tax Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Hrblock tax  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Hrblock tax If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Hrblock tax For more information, see How Much Can Be Contributed? in this chapter. Hrblock tax Modified AGI limit for traditional IRA contributions increased. Hrblock tax  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Hrblock tax If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Hrblock tax If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Hrblock tax See How Much Can You Deduct? in this chapter. Hrblock tax Net Investment Income Tax. Hrblock tax  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Hrblock tax However, these distributions are taken into account when determining the modified adjusted gross income threshold. Hrblock tax Distributions from a nonqualified retirement plan are included in net investment income. Hrblock tax See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Hrblock tax What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Hrblock tax  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Hrblock tax If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Hrblock tax If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Hrblock tax Introduction This chapter discusses the original IRA. Hrblock tax In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Hrblock tax ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Hrblock tax The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Hrblock tax Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Hrblock tax Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Hrblock tax You can have a traditional IRA whether or not you are covered by any other retirement plan. Hrblock tax However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Hrblock tax See How Much Can You Deduct , later. Hrblock tax Both spouses have compensation. Hrblock tax   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Hrblock tax You cannot both participate in the same IRA. Hrblock tax If you file a joint return, only one of you needs to have compensation. Hrblock tax What Is Compensation? Generally, compensation is what you earn from working. Hrblock tax For a summary of what compensation does and does not include, see Table 1-1. Hrblock tax Compensation includes all of the items discussed next (even if you have more than one type). Hrblock tax Wages, salaries, etc. Hrblock tax   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Hrblock tax The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Hrblock tax Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Hrblock tax Commissions. Hrblock tax   An amount you receive that is a percentage of profits or sales price is compensation. Hrblock tax Self-employment income. Hrblock tax   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Hrblock tax   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Hrblock tax Self-employment loss. Hrblock tax   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Hrblock tax Alimony and separate maintenance. Hrblock tax   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Hrblock tax Nontaxable combat pay. Hrblock tax   If you were a member of the U. Hrblock tax S. Hrblock tax Armed Forces, compensation includes any nontaxable combat pay you received. Hrblock tax This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Hrblock tax Table 1-1. Hrblock tax Compensation for Purposes of an IRA Includes . Hrblock tax . Hrblock tax . Hrblock tax Does not include . Hrblock tax . Hrblock tax . Hrblock tax   earnings and profits from property. Hrblock tax wages, salaries, etc. Hrblock tax     interest and dividend income. Hrblock tax commissions. Hrblock tax     pension or annuity income. Hrblock tax self-employment income. Hrblock tax     deferred compensation. Hrblock tax alimony and separate maintenance. Hrblock tax     income from certain  partnerships. Hrblock tax nontaxable combat pay. Hrblock tax     any amounts you exclude from income. Hrblock tax     What Is Not Compensation? Compensation does not include any of the following items. Hrblock tax Earnings and profits from property, such as rental income, interest income, and dividend income. Hrblock tax Pension or annuity income. Hrblock tax Deferred compensation received (compensation payments postponed from a past year). Hrblock tax Income from a partnership for which you do not provide services that are a material income-producing factor. Hrblock tax Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Hrblock tax Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Hrblock tax When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Hrblock tax However, the time for making contributions for any year is limited. Hrblock tax See When Can Contributions Be Made , later. Hrblock tax How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Hrblock tax You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Hrblock tax You can also open an IRA through your stockbroker. Hrblock tax Any IRA must meet Internal Revenue Code requirements. Hrblock tax The requirements for the various arrangements are discussed below. Hrblock tax Kinds of traditional IRAs. Hrblock tax   Your traditional IRA can be an individual retirement account or annuity. Hrblock tax It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Hrblock tax Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Hrblock tax The account is created by a written document. Hrblock tax The document must show that the account meets all of the following requirements. Hrblock tax The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Hrblock tax The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Hrblock tax However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Hrblock tax Contributions, except for rollover contributions, must be in cash. Hrblock tax See Rollovers , later. Hrblock tax You must have a nonforfeitable right to the amount at all times. Hrblock tax Money in your account cannot be used to buy a life insurance policy. Hrblock tax Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Hrblock tax You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Hrblock tax See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Hrblock tax Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Hrblock tax An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Hrblock tax An individual retirement annuity must meet all the following requirements. Hrblock tax Your entire interest in the contract must be nonforfeitable. Hrblock tax The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Hrblock tax There must be flexible premiums so that if your compensation changes, your payment can also change. Hrblock tax This provision applies to contracts issued after November 6, 1978. Hrblock tax The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Hrblock tax Distributions must begin by April 1 of the year following the year in which you reach age 70½. Hrblock tax See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Hrblock tax Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Hrblock tax The bonds have the following features. Hrblock tax They stop earning interest when you reach age 70½. Hrblock tax If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Hrblock tax You cannot transfer the bonds. Hrblock tax If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Hrblock tax See Age 59½ Rule under Early Distributions, later. Hrblock tax You can roll over redemption proceeds into IRAs. Hrblock tax Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Hrblock tax Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Hrblock tax See Publication 560 for more information about SEPs. Hrblock tax Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Hrblock tax The requirements for individual retirement accounts apply to these traditional IRAs. Hrblock tax Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Hrblock tax However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Hrblock tax The disclosure statement must explain certain items in plain language. Hrblock tax For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Hrblock tax This explanation must appear at the beginning of the disclosure statement. Hrblock tax If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Hrblock tax The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Hrblock tax These requirements apply to all sponsors. Hrblock tax How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Hrblock tax These limits and rules are explained below. Hrblock tax Community property laws. Hrblock tax   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Hrblock tax This is the rule even in states with community property laws. Hrblock tax Brokers' commissions. Hrblock tax   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Hrblock tax For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Hrblock tax Trustees' fees. Hrblock tax   Trustees' administrative fees are not subject to the contribution limit. Hrblock tax For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Hrblock tax Qualified reservist repayments. Hrblock tax   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Hrblock tax You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Hrblock tax To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Hrblock tax Limit. Hrblock tax   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Hrblock tax When repayment contributions can be made. Hrblock tax   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Hrblock tax No deduction. Hrblock tax   You cannot deduct qualified reservist repayments. Hrblock tax Reserve component. Hrblock tax   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Hrblock tax Figuring your IRA deduction. Hrblock tax   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Hrblock tax Reporting the repayment. Hrblock tax   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Hrblock tax Example. Hrblock tax   In 2013, your IRA contribution limit is $5,500. Hrblock tax However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Hrblock tax You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Hrblock tax In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Hrblock tax   For 2013, you can contribute a total of $8,500 to your IRA. Hrblock tax This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Hrblock tax You contribute the maximum allowable for the year. Hrblock tax Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Hrblock tax The qualified reservist repayment is not deductible. Hrblock tax Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Hrblock tax See chapter 2 for information about Roth IRAs. Hrblock tax General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Hrblock tax Note. Hrblock tax This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Hrblock tax This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Hrblock tax (See Nondeductible Contributions , later. Hrblock tax ) Qualified reservist repayments do not affect this limit. Hrblock tax Examples. Hrblock tax George, who is 34 years old and single, earns $24,000 in 2013. Hrblock tax His IRA contributions for 2013 are limited to $5,500. Hrblock tax Danny, an unmarried college student working part time, earns $3,500 in 2013. Hrblock tax His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Hrblock tax More than one IRA. Hrblock tax   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Hrblock tax Annuity or endowment contracts. Hrblock tax   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Hrblock tax If more than this amount is contributed, the annuity or endowment contract is disqualified. Hrblock tax Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Hrblock tax Your spouse's IRA contribution for the year to a traditional IRA. Hrblock tax Any contributions for the year to a Roth IRA on behalf of your spouse. Hrblock tax This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Hrblock tax Note. Hrblock tax This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Hrblock tax Example. Hrblock tax Kristin, a full-time student with no taxable compensation, marries Carl during the year. Hrblock tax Neither of them was age 50 by the end of 2013. Hrblock tax For the year, Carl has taxable compensation of $30,000. Hrblock tax He plans to contribute (and deduct) $5,500 to a traditional IRA. Hrblock tax If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Hrblock tax This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Hrblock tax In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Hrblock tax Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Hrblock tax However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Hrblock tax See How Much Can You Deduct , later. Hrblock tax Example. Hrblock tax Tom and Darcy are married and both are 53. Hrblock tax They both work and each has a traditional IRA. Hrblock tax Tom earned $3,800 and Darcy earned $48,000 in 2013. Hrblock tax Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Hrblock tax They can contribute up to $6,500 to Darcy's IRA. Hrblock tax If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Hrblock tax Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Hrblock tax Example. Hrblock tax Rafael, who is 40, earns $30,000 in 2013. Hrblock tax Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Hrblock tax After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Hrblock tax He cannot contribute $2,500 more than the limit for any later year. Hrblock tax More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Hrblock tax However, a penalty or additional tax may apply. Hrblock tax See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Hrblock tax When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Hrblock tax Contributions must be in the form of money (cash, check, or money order). Hrblock tax Property cannot be contributed. Hrblock tax Although property cannot be contributed, your IRA may invest in certain property. Hrblock tax For example, your IRA may purchase shares of stock. Hrblock tax For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Hrblock tax You may be able to transfer or roll over certain property from one retirement plan to another. Hrblock tax See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Hrblock tax You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Hrblock tax For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Hrblock tax Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Hrblock tax For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Hrblock tax See Who Can Open a Traditional IRA , earlier. Hrblock tax Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Hrblock tax Contributions can resume for any years that you qualify. Hrblock tax Contributions must be made by due date. Hrblock tax   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Hrblock tax For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Hrblock tax Age 70½ rule. Hrblock tax   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Hrblock tax   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Hrblock tax If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Hrblock tax Designating year for which contribution is made. Hrblock tax   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Hrblock tax If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Hrblock tax Filing before a contribution is made. Hrblock tax    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Hrblock tax Generally, the contribution must be made by the due date of your return, not including extensions. Hrblock tax Contributions not required. Hrblock tax   You do not have to contribute to your traditional IRA for every tax year, even if you can. Hrblock tax How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Hrblock tax However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Hrblock tax See Limit if Covered by Employer Plan , later. Hrblock tax You may be able to claim a credit for contributions to your traditional IRA. Hrblock tax For more information, see chapter 4. Hrblock tax Trustees' fees. Hrblock tax   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Hrblock tax However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Hrblock tax For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Hrblock tax Brokers' commissions. Hrblock tax   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Hrblock tax Full deduction. Hrblock tax   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Hrblock tax   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Hrblock tax Kay Bailey Hutchison Spousal IRA. Hrblock tax   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Hrblock tax The IRA deduction for the year of the spouse with the greater compensation. Hrblock tax Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Hrblock tax Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Hrblock tax   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Hrblock tax Note. Hrblock tax If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Hrblock tax After a divorce or legal separation, you can deduct only the contributions to your own IRA. Hrblock tax Your deductions are subject to the rules for single individuals. Hrblock tax Covered by an employer retirement plan. Hrblock tax   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Hrblock tax This is discussed later under Limit if Covered by Employer Plan . Hrblock tax Limits on the amount you can deduct do not affect the amount that can be contributed. Hrblock tax Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Hrblock tax The “Retirement Plan” box should be checked if you were covered. Hrblock tax Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Hrblock tax If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Hrblock tax Federal judges. Hrblock tax   For purposes of the IRA deduction, federal judges are covered by an employer plan. Hrblock tax For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Hrblock tax These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Hrblock tax Tax year. Hrblock tax   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Hrblock tax For almost all people, the tax year is the calendar year. Hrblock tax Defined contribution plan. Hrblock tax   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Hrblock tax However, also see Situations in Which You Are Not Covered , later. Hrblock tax   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Hrblock tax In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Hrblock tax The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Hrblock tax Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Hrblock tax Example. Hrblock tax Company A has a money purchase pension plan. Hrblock tax Its plan year is from July 1 to June 30. Hrblock tax The plan provides that contributions must be allocated as of June 30. Hrblock tax Bob, an employee, leaves Company A on December 31, 2012. Hrblock tax The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Hrblock tax Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Hrblock tax   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Hrblock tax If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Hrblock tax If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Hrblock tax Example. Hrblock tax Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Hrblock tax The plan year runs from July 1 to June 30. Hrblock tax Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Hrblock tax Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Hrblock tax As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Hrblock tax In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Hrblock tax On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Hrblock tax That contribution was made on February 15, 2014. Hrblock tax Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Hrblock tax No vested interest. Hrblock tax   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Hrblock tax Defined benefit plan. Hrblock tax   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Hrblock tax This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Hrblock tax   A defined benefit plan is any plan that is not a defined contribution plan. Hrblock tax In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Hrblock tax The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Hrblock tax Defined benefit plans include pension plans and annuity plans. Hrblock tax Example. Hrblock tax Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Hrblock tax Nick leaves Company B on December 31, 2012. Hrblock tax Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Hrblock tax No vested interest. Hrblock tax   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Hrblock tax Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Hrblock tax Social security or railroad retirement. Hrblock tax   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Hrblock tax Benefits from previous employer's plan. Hrblock tax   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Hrblock tax Reservists. Hrblock tax   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Hrblock tax You are not covered by the plan if both of the following conditions are met. Hrblock tax The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Hrblock tax You did not serve more than 90 days on active duty during the year (not counting duty for training). Hrblock tax Volunteer firefighters. Hrblock tax   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Hrblock tax You are not covered by the plan if both of the following conditions are met. Hrblock tax The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Hrblock tax Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Hrblock tax Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Hrblock tax Your deduction is also affected by how much income you had and by your filing status. Hrblock tax Your deduction may also be affected by social security benefits you received. Hrblock tax Reduced or no deduction. Hrblock tax   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Hrblock tax   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Hrblock tax These amounts vary depending on your filing status. Hrblock tax   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Hrblock tax Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Hrblock tax Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Hrblock tax You received social security benefits. Hrblock tax You received taxable compensation. Hrblock tax Contributions were made to your traditional IRA. Hrblock tax You or your spouse was covered by an employer retirement plan. Hrblock tax Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Hrblock tax Appendix B includes an example with filled-in worksheets to assist you. Hrblock tax Table 1-2. Hrblock tax Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Hrblock tax IF your filing status is . Hrblock tax . Hrblock tax . Hrblock tax AND your modified adjusted gross income (modified AGI) is . Hrblock tax . Hrblock tax . Hrblock tax THEN you can take . Hrblock tax . Hrblock tax . Hrblock tax single or head of household $59,000 or less a full deduction. Hrblock tax more than $59,000 but less than $69,000 a partial deduction. Hrblock tax $69,000 or more no deduction. Hrblock tax married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Hrblock tax more than $95,000 but less than $115,000 a partial deduction. Hrblock tax $115,000 or more no deduction. Hrblock tax married filing separately2 less than $10,000 a partial deduction. Hrblock tax $10,000 or more no deduction. Hrblock tax 1 Modified AGI (adjusted gross income). Hrblock tax See Modified adjusted gross income (AGI) , later. Hrblock tax  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Hrblock tax Table 1-3. Hrblock tax Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Hrblock tax IF your filing status is . Hrblock tax . Hrblock tax . Hrblock tax AND your modified adjusted gross income (modified AGI) is . Hrblock tax . Hrblock tax . Hrblock tax THEN you can take . Hrblock tax . Hrblock tax . Hrblock tax single, head of household, or qualifying widow(er) any amount a full deduction. Hrblock tax married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Hrblock tax married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Hrblock tax more than $178,000 but less than $188,000 a partial deduction. Hrblock tax $188,000 or more no deduction. Hrblock tax married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Hrblock tax $10,000 or more no deduction. Hrblock tax 1 Modified AGI (adjusted gross income). Hrblock tax See Modified adjusted gross income (AGI) , later. Hrblock tax  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Hrblock tax For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Hrblock tax If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Hrblock tax Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Hrblock tax Covered by a retirement plan. Hrblock tax   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Hrblock tax For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Hrblock tax If your spouse is covered. Hrblock tax   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Hrblock tax Filing status. Hrblock tax   Your filing status depends primarily on your marital status. Hrblock tax For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Hrblock tax If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Hrblock tax Lived apart from spouse. Hrblock tax   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Hrblock tax Modified adjusted gross income (AGI). Hrblock tax   You can use Worksheet 1-1 to figure your modified AGI. Hrblock tax If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Hrblock tax    Do not assume that your modified AGI is the same as your compensation. Hrblock tax Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Hrblock tax Form 1040. Hrblock tax   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Hrblock tax IRA deduction. Hrblock tax Student loan interest deduction. Hrblock tax Tuition and fees deduction. Hrblock tax Domestic production activities deduction. Hrblock tax Foreign earned income exclusion. Hrblock tax Foreign housing exclusion or deduction. Hrblock tax Exclusion of qualified savings bond interest shown on Form 8815. Hrblock tax Exclusion of employer-provided adoption benefits shown on Form 8839. Hrblock tax This is your modified AGI. Hrblock tax Form 1040A. Hrblock tax   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Hrblock tax IRA deduction. Hrblock tax Student loan interest deduction. Hrblock tax Tuition and fees deduction. Hrblock tax Exclusion of qualified savings bond interest shown on Form 8815. Hrblock tax This is your modified AGI. Hrblock tax Form 1040NR. Hrblock tax   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Hrblock tax IRA deduction. Hrblock tax Student loan interest deduction. Hrblock tax Domestic production activities deduction. Hrblock tax Exclusion of qualified savings bond interest shown on Form 8815. Hrblock tax Exclusion of employer-provided adoption benefits shown on Form 8839. Hrblock tax This is your modified AGI. Hrblock tax Income from IRA distributions. Hrblock tax   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Hrblock tax Both contributions for 2013 and distributions in 2013. Hrblock tax   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Hrblock tax You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Hrblock tax (See Nondeductible Contributions and Worksheet 1-2, later. Hrblock tax ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Hrblock tax To do this, you can use Worksheet 1-5, later. Hrblock tax   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Hrblock tax How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013. Hrblock tax The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Hrblock tax If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Hrblock tax Note. Hrblock tax If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock tax Worksheet 1-1. Hrblock tax Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Hrblock tax 1. Hrblock tax Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Hrblock tax   2. Hrblock tax Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Hrblock tax   3. Hrblock tax Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Hrblock tax   4. Hrblock tax Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Hrblock tax   5. Hrblock tax Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Hrblock tax   6. Hrblock tax Enter any foreign housing deduction from Form 2555, line 50 6. Hrblock tax   7. Hrblock tax Enter any excludable savings bond interest from Form 8815, line 14 7. Hrblock tax   8. Hrblock tax Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Hrblock tax   9. Hrblock tax Add lines 1 through 8. Hrblock tax This is your Modified AGI for traditional IRA purposes 9. Hrblock tax   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Hrblock tax If you file Form 1040A, enter your IRA deduction on line 17 of that form. Hrblock tax If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Hrblock tax You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Hrblock tax Self-employed. Hrblock tax   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Hrblock tax If you file Form 1040NR, enter your deduction on line 28 of that form. Hrblock tax Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Hrblock tax The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Hrblock tax Example. Hrblock tax Tony is 29 years old and single. Hrblock tax In 2013, he was covered by a retirement plan at work. Hrblock tax His salary is $62,000. Hrblock tax His modified AGI is $70,000. Hrblock tax Tony makes a $5,500 IRA contribution for 2013. Hrblock tax Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Hrblock tax He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Hrblock tax Repayment of reservist distributions. Hrblock tax   Nondeductible contributions may include repayments of qualified reservist distributions. Hrblock tax For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Hrblock tax Form 8606. Hrblock tax   To designate contributions as nondeductible, you must file Form 8606. Hrblock tax (See the filled-in Forms 8606 in this chapter. Hrblock tax )   You do not have to designate a contribution as nondeductible until you file your tax return. Hrblock tax When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Hrblock tax   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Hrblock tax    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Hrblock tax In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Hrblock tax See Form 8606 under Distributions Fully or Partly Taxable, later. Hrblock tax Failure to report nondeductible contributions. Hrblock tax   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Hrblock tax All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Hrblock tax Penalty for overstatement. Hrblock tax   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Hrblock tax Penalty for failure to file Form 8606. Hrblock tax   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Hrblock tax Tax on earnings on nondeductible contributions. Hrblock tax   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Hrblock tax Cost basis. Hrblock tax   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Hrblock tax Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Hrblock tax    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Hrblock tax See Are Distributions Taxable, later, for more information. Hrblock tax Recordkeeping. Hrblock tax There is a recordkeeping worksheet, Appendix A. Hrblock tax Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Hrblock tax Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Hrblock tax Example 1. Hrblock tax For 2013, Tom and Betty file a joint return on Form 1040. Hrblock tax They are both 39 years old. Hrblock tax They are both employed and Tom is covered by his employer's retirement plan. Hrblock tax Tom's salary is $59,000 and Betty's is $32,555. Hrblock tax They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Hrblock tax Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Hrblock tax For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Hrblock tax Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Hrblock tax Tom can take a deduction of only $5,080. Hrblock tax He can choose to treat the $5,080 as either deductible or nondeductible contributions. Hrblock tax He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Hrblock tax He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Hrblock tax Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Hrblock tax Betty figures her IRA deduction as follows. Hrblock tax Betty can treat all or part of her contributions as either deductible or nondeductible. Hrblock tax This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Hrblock tax She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Hrblock tax Betty decides to treat her $5,500 IRA contributions as deductible. Hrblock tax The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Hrblock tax Example 2. Hrblock tax For 2013, Ed and Sue file a joint return on Form 1040. Hrblock tax They are both 39 years old. Hrblock tax Ed is covered by his employer's retirement plan. Hrblock tax Ed's salary is $45,000. Hrblock tax Sue had no compensation for the year and did not contribute to an IRA. Hrblock tax Sue is not covered by an employer plan. Hrblock tax Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Hrblock tax Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Hrblock tax Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Hrblock tax He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Hrblock tax Sue figures her IRA deduction as shown on Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Hrblock tax Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock tax ) Note. Hrblock tax If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock tax IF you . Hrblock tax . Hrblock tax . Hrblock tax AND your  filing status is . Hrblock tax . Hrblock tax . Hrblock tax AND your modified AGI is over . Hrblock tax . Hrblock tax . Hrblock tax THEN enter on  line 1 below . Hrblock tax . Hrblock tax . Hrblock tax       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock tax Enter applicable amount from table above 1. Hrblock tax   2. Hrblock tax Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock tax     Note. Hrblock tax If line 2 is equal to or more than the amount on line 1, stop here. Hrblock tax  Your IRA contributions are not deductible. Hrblock tax See Nondeductible Contributions , earlier. Hrblock tax     3. Hrblock tax Subtract line 2 from line 1. Hrblock tax If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock tax You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock tax   4. Hrblock tax Multiply line 3 by the percentage below that applies to you. Hrblock tax If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock tax (For example, $611. Hrblock tax 40 is rounded to $620. Hrblock tax ) However, if the result is less than $200, enter $200. Hrblock tax         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock tax 5% (. Hrblock tax 275) (by 32. Hrblock tax 5% (. Hrblock tax 325) if you are age 50 or older). Hrblock tax All others, multiply line 3 by 55% (. Hrblock tax 55) (by 65% (. Hrblock tax 65) if you are age 50 or older). Hrblock tax 4. Hrblock tax   5. Hrblock tax Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock tax If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock tax If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock tax   6. Hrblock tax Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock tax If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock tax 6. Hrblock tax   7. Hrblock tax IRA deduction. Hrblock tax Compare lines 4, 5, and 6. Hrblock tax Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock tax If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock tax   8. Hrblock tax Nondeductible contribution. Hrblock tax Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock tax  Enter the result here and on line 1 of your Form 8606 8. Hrblock tax   Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock tax ) Note. Hrblock tax If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock tax IF you . Hrblock tax . Hrblock tax . Hrblock tax AND your  filing status is . Hrblock tax . Hrblock tax . Hrblock tax AND your modified AGI is over . Hrblock tax . Hrblock tax . Hrblock tax THEN enter on  line 1 below . Hrblock tax . Hrblock tax . Hrblock tax       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock tax Enter applicable amount from table above 1. Hrblock tax 115,000 2. Hrblock tax Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock tax 96,555   Note. Hrblock tax If line 2 is equal to or more than the amount on line 1, stop here. Hrblock tax  Your IRA contributions are not deductible. Hrblock tax See Nondeductible Contributions , earlier. Hrblock tax     3. Hrblock tax Subtract line 2 from line 1. Hrblock tax If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock tax You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock tax 18,445 4. Hrblock tax Multiply line 3 by the percentage below that applies to you. Hrblock tax If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock tax (For example, $611. Hrblock tax 40 is rounded to $620. Hrblock tax ) However, if the result is less than $200, enter $200. Hrblock tax         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock tax 5% (. Hrblock tax 275) (by 32. Hrblock tax 5% (. Hrblock tax 325) if you are age 50 or older). Hrblock tax All others, multiply line 3 by 55% (. Hrblock tax 55) (by 65% (. Hrblock tax 65) if you are age 50 or older). Hrblock tax 4. Hrblock tax 5,080 5. Hrblock tax Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock tax If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock tax If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock tax 59,000 6. Hrblock tax Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock tax If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock tax 6. Hrblock tax 5,500 7. Hrblock tax IRA deduction. Hrblock tax Compare lines 4, 5, and 6. Hrblock tax Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock tax If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock tax 5,080 8. Hrblock tax Nondeductible contribution. Hrblock tax Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock tax  Enter the result here and on line 1 of your Form 8606 8. Hrblock tax 420 Worksheet 1-2. Hrblock tax Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock tax ) Note. Hrblock tax If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock tax IF you . Hrblock tax . Hrblock tax . Hrblock tax AND your  filing status is . Hrblock tax . Hrblock tax . Hrblock tax AND your modified AGI is over . Hrblock tax . Hrblock tax . Hrblock tax THEN enter on  line 1 below . Hrblock tax . Hrblock tax . Hrblock tax       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock tax Enter applicable amount from table above 1. Hrblock tax 188,000 2. Hrblock tax Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock tax 180,555   Note. Hrblock tax If line 2 is equal to or more than the amount on line 1, stop here. Hrblock tax  Your IRA contributions are not deductible. Hrblock tax See Nondeductible Contributions , earlier. Hrblock tax     3. Hrblock tax Subtract line 2 from line 1. Hrblock tax If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock tax You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock tax 7,445 4. Hrblock tax Multiply line 3 by the percentage below that applies to you. Hrblock tax If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock tax (For example, $611. Hrblock tax 40 is rounded to $620. Hrblock tax ) However, if the result is less than $200, enter $200. Hrblock tax         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock tax 5% (. Hrblock tax 275) (by 32. Hrblock tax 5% (. Hrblock tax 325) if you are age 50 or older). Hrblock tax All others, multiply line 3 by 55% (. Hrblock tax 55) (by 65% (. Hrblock tax 65) if you are age 50 or older). Hrblock tax 4. Hrblock tax 4,100 5. Hrblock tax Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock tax If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock tax If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock tax 39,500 6. Hrblock tax Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock tax If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock tax 6. Hrblock tax 5,500 7. Hrblock tax IRA deduction. Hrblock tax Compare lines 4, 5, and 6. Hrblock tax Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock tax If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock tax 4,100 8. Hrblock tax Nondeductible contribution. Hrblock tax Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock tax  Enter the result here and on line 1 of your Form 8606 8. Hrblock tax 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Hrblock tax A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Hrblock tax Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Hrblock tax Inherited from spouse. Hrblock tax   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Hrblock tax You can: Treat it as your own IRA by designating yourself as the account owner. Hrblock tax Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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The Hrblock Tax

Hrblock tax Publication 600 - Additional Material Table of Contents Please click here for the text description of the image. Hrblock tax Electronic Filing (E-file) Please click here for the text description of the image. Hrblock tax Electronic Filing (e-file) This image is too large to be displayed in the current screen. Hrblock tax Please click the link to view the image. Hrblock tax Electronic Filing (e-file) Please click here for the text description of the image. Hrblock tax Electronic Filing (e-file) Prev  Up     Home   More Online Publications